Mr. JENKINS. That is right. There is a type of loan, the first one of its kind that we have approved, which is to finance a grain elevator. Of course, there is no employment factor there to speak of but it is in an area where the farmers have a lot of grain and they have to dispose of it or dump it on the market at harvesttime. Senator CLARK. In other words, you are looking to meet an economic need? Mr. JENKINS. That is right. Senator CLARK. If Senator Sparkman will permit, you have some areas of surplus labor in North Carolina, particularly Asheville and Durham. I wonder if you have made any loans over there? Mr. JENKINS. Yes, sir. Senator CLARK. And for the purpose of providing a greater employment than was then in existence, I suppose, at least in part? Mr. JENKINS. In the unemployment areas, of course, we use similar standards for lending, but at the same time, naturally we try to speed up our processing and do anything we reasonably can to be of the utmost assistance. Senator CLARK. That is an additional factor which you take into consideration? Mr. JENKINS That is right. Senator CLARK. How about Fayetteville? Have you made any loans there? Mr. JENKINS. I think one in Fayetteville. Senator CLARK. In Kinston? Mr. JENKINS. No, sir. Senator CLARK. Mount Airy? Mr. JENKINS. We have approved three loans there. Senator CLARK. Rocky Mount? Mr. JENKINS. No, sir. Senator CLARK. Shelby-Kings Mountain? Mr. JENKINS. We have one under consideration as Kings Mountain. Senator CLARK. And Waynesville? Mr. JENKINS. Waynesville. I do not believe we have approved any there yet. Senator SPARKMAN. Suppose a manufacturing concern decided they could generate greater efficiency if they could build a new plant, or extend a present plant, or replace their equipment with new equipment. Would that come within your criteria? Mr. JENKINS. Yes, sir. If the plant needs expansion; and in fact a number of our loans have been made for that purpose where production was expanded and employment increased. Senator SPARK MAN. To modernize, and so forth? Mr. JENKINS. That is right. For example, we had one application from a manufacturer who is operating in three buildings, one of them three-quarters of a mile away from the other. He was bulging out at the seams with orders that he could not fill and wanted to get all of his operations under one cover, so we approved a loan to him for a new building which will result in an expansion of production and increased employment. Senator SPARKMAN. I hate to, it is most interesting testimony, but I will have to leave now. Senator CLARK. Is there anything else you want to ask? 93527-57 -9 Senator SPARKMAN. I cannot think of it at this moment. Senator CLARK. Are you a banker by profession, Mr. Jenkins? Mr. JENKINS. Yes, sir. I was with RFC and SBA for a good many years, and prior to that I was in the banking business in North Carolina. Senator CLARK. I take it you do not see any crying need for a national investment company in North Carolina. Is that correct? Mr. JENKINS. That is my feeling at this time but I do not want it to be construed as being the feeling of my board as such. Senator CLARK. That is your personal feeling? Mr. JENKINS. We are wondering as to the possibility that maybe something could be worked out if a national investment company may be set up in a State that has a development corporation which may organize one as a subsidiary of some sort and small business in that State receive the benefit of both of them and yet go through the same channels. Senator CLARK. Let me ask you another question particularly because you have this banking experience. Would you say that North Carolina had adequate sources of bank credit available? We think in terms sometime of pools of credit in the country, with New York being the largest and Boston being another large one, and perhaps Philadelphia, Baltimore, San Francisco, and Chicago being others. Is there plenty of bank credit around in North Carolina or do your banks have to go to New York banks for help every so often? Mr. JENKINS. The bank loans in North Carolina are up pretty high as a whole. Of course, with the fact that money is tight and interest rates are high one would say there would be plenty of room for additional funds for lending to various types of businesses. Senator CLARK. Of course that is true all over the country. Mr. JENKINS. That is right. I do not know that the money situation in North Carolina is very much different than in other parts of the country I know of. However, I have not recently done any research on that. Senator CLARK. My suggestion would be, and check me if I am wrong, that North Carolina has become one of the "have" States, instead of one of the "have not" States. I wonder if you would think generally speaking that that was a fair statement? Mr. JENKINS. North Carolina has put forth a lot of effort and a lot of hard work. Its Governor is a businessman who tries to operate on a business basis. Our Development Corporation has taken a tremendous amount of work to put it over and we are very proud of its accomplishments and future prospects. Senator CLARK. Let us put it this way: You are better off than some of your immediate neighbors? Mr. JENKINS. Well, we probably are in some respects. Senator CLARK. Thank you very much, Mr. Jenkns. Do you want to add anything? Mr. HARTSFIELD. No. Thank you. Senator CLARK. Thank you very much, gentleman. We certainly appreciate your coming here today. The hearing will recess until 10 o'clock tomorrow morning. (Whereupon, at 11:55 a. m. the subcommittee recessed until 10 a. m. the following day, Wednesday, June 5, 1957.) CREDIT NEEDS OF SMALL BUSINESS WEDNESDAY, JUNE 5, 1957 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, The subcommittee met, pursuant to recess at 10 a. m., Senator Joseph S. Clark, chairman of the subcommittee, presiding. Present: Senators Clark, Fulbright, Sparkman, Beall, and Case. Also present: Senator Bush. Senator CLARK. The committee will be in session. There will be introduced into the record a statement of Senator Frederick G. Payne in support of S. 244, a bill to aid small businesses in areas of labor surplus. (The statement referred to follows:) STATEMENT OF FREDERICK G. PAYNE, A UNITED STATES SENATOR FROM THE STATE OF MAINE Small business in America today faces the stiffest competition in its history for the consumer dollar. In the new age of industrial and commercial giants the little guy is on the ropes and the byword for business today might well be "Get Big or Get Out." In every phase of financing, production, and merchandizing, the small-business man operates at a great disadvantage. Capital for new plants and machinery costs him a higher rate of interest. If his equipment is older (and it usually is) then his production costs are higher. Normally in a small plant the per-unit costs are higher. Costs of transportation are increased when he must ship in less than carload lots. In merchandising his product, the small-business man meets even tougher obstacles. The advertising outlays made by the major corporations have multiplied many times over during the past decade. The small-business man cannot hope to match these sums. Nationwide sales organizations and chain stores have put the squeeze on the small local operator. The net effect of these conditions has been to force more and more of the Nation's small businesses into liquidation or bankruptcy. To assist these concerns Congress, in 1953, passed the Small Business Act which declared it to be the policy of the Government to "aid, counsel, assist and protect insofar as is possible the interest of small business concerns." The Small Business Administration was created to carry out this policy and since that time has worked effectively to assist small business through technical and management advice and business loans. At the first of this year the SBA had over $149 million involved in loans and loan commitments and according to current reports this figure has risen sharply since that date. These loans have served to provide small businesses with necessary credit when it has not been available elsewhere and have helped to correct one of the most grievous disadvantages of small business-the higher cost of credit and capital funds. In 1955, a special category of loans was created by the Small Business Administration known as disaster loans. These are made at low rates of interest and for long periods to small businesses directly affected by or in areas affected by floods and droughts. It was felt that small businesses so affected would be in much greater need of additional credit and that in disaster-struck areas, little credit would be available. With this extra source of funds, small concerns are able to recover more rapidly so that the economic effects of disaster are mitigated to some extent. A great degree of similarity exists between a natural disaster such as a flood or drought and an economic disaster of depression. Despite the current general prosperity, areas of our nation with high unemployment, are at this moment suffering from the results of just such a disaster. The small businesses of these areas, while experiencing the continuing heavy competition from larger companies are also plagued by depression-caused low sales and high credit costs. The smaller concerns with low cash reserves are the first to fall under such conditions. They need help and need it badly to carry them through the crisis. If these small businesses are allowed to go bankrupt, the effects of the depression are expanded into an ever-widening circle. To prevent this and to sustain small businesses in these critical areas, I have introduced legislation (S. 244) to establish a new category of disaster loans. These loans would be similar to the present type of disaster loans and would be available to small businesses in areas of "substantial labor surplus" as determined by the Secretary of Labor. According to the Bimonthly Summary of Labor Market Developinents f May 1951, 21 major areas of the Nation are in this classification along with 59 smaller areas. A list of these areas is attached and it will be noted that they are spread over 22 States. I can assure you gentlemen that small businesses in these areas need more help than the SBA is now able to offer them. Loans at lower interest rates and for longer periods will provide material assistance for these businesses. This bill would merely establish a small degree of priority within the SBA loan fund for those in the most need. Of course, these loans could be made only if the applicant met all other requirements for SBA loans. No new appropriation is required since funds are already earmarked for disaster loans. Gentlemen, I cannot overstate the need for this legislation. It is my earnest hope that the subcommittee will take favorable action on S. 244 and will include it among its recommendations for small business legislation this year. AREAS OF SUBSTANTIAL LABOR SURPLUS MAY 1957 MAJOR AREAS Indiana Evansville, Terre Haute Ma sachu e: Fall Rover, L ence, Lowell Michigan: Flint, Grand Rapids, Muskegon New Jersey: Atlantic City North Carolina: Asheville, Durham Pennsylvania: Altoona, Johnstown, Scranton, Wilkes-Barre-Hazleton Puerto Rico: Mayaguez, Ponce, San Juan Rhode Island: Providence West Virginia: Charleston Wisconsin: Kenosha Illinois: Canton, Harrisburg, Herrin-Murphysboro-West Frankfort, Litchfield, Mount Carmel-Olney, Mount Vernon Indiana: Michigan City-La Porte, Muncie, Richmond, Vincennes Kansas: Coffeyville-Independence-Parsons, Pittsburg Kentucky: Corbin, Frankfort, Hazard, Lexington, Madisonville, MiddlesboroHarlan, Morehead-Grayson, Owensboro, Paintsville-Prestonsburg, PikesvilleWilliamson Maine: Biddeford-Sanford Maryland: Cumberland Massachusetts: North Adams Michigan: Iron Mountain, Monroe, Port Huron New Jersey: Bridgeton, Long Branch 1 These areas are not part of the regular area labor market reporting and area classification program of the Bureau of Employment Security and its affiliated State employment security agencies. North Carolina: Fayetteville, Kinston, Mount Airy, Rocky Mount, Shelby-Kings Mountain, Waynesville Ohio: Springfield Oklahoma: McAlester Pennsylvania: Berwick-Bloomsburg, Clearfield-DuBois, Lewistown, Lock Haven, Pottsville, Sunbury-Shamokin-Mt. Carmel, Uniontown-Connelsville Rhode Island: Newport Tennessee: La Follette-Jellico-Tazewell Texas: Texarkana Virginia: Big Stone Gap-Appalachia, Radford-Pulaski, Richlands-Bluefield West Virginia: Beckley, Fairmont, Logan, Point Pleasant-Gallipolis, Ronceverte-White Sulphur Springs, Welch Senator CLARK. I would like to say to our friends from Arkansas that Senator Fulbright is very anxious to be here to hear your testimony, and that he had to start another meeting, after which he will come here. In order to save time, both of the committee and the witnesses, we would like to have Mr. Arthur F. Maxwell for our first witness. Is Mr. Maxwell here? STATEMENT OF ARTHUR F. MAXWELL, ON BEHALF OF THE AMERICAN BANKERS ASSOCIATION Mr. MAXWELL. Yes. Senator CLARK. Mr. Maxwell, would you be prepared to testify now? Mr. MAXWELL. Yes. Senator CLARK. We are very happy to have you with us, Mr. Maxwell. Do you have a prepared statement? Mr. MAXWELL. We have a statement, sir. Senator CLARK. Mr. Maxwell, we want to give you all the time. you need, but I wonder if you would be agreeable to filing your statement for the record and just hitting the highlights in your verbal testimony. On the other hand, if you prefer to read it, that would be satisfactory. Mr. MAXWELL. Would it be satisfactory if I read part of it and skip certain quotations? Senator CLARK. Yes. Go ahead in your own way, Mr. Maxwell. Mr. MAXWELL. Mr. Chairman and members of the committee: My name is Arthur F. Maxwell. I am president of the First National Bank of Biddeford, Maine, and a member of the credit policy commission of the American Bankers Association. I am presenting this statement on behalf of the association in connection with various bills, amending the Small Business Act of 1953, which are being considered at this time by your committee. The American Bankers Association, the membership of which consists of 97 percent of all the banks in the country, naturally is interested in the problems of small business since a majority of the banks making up its membership are small business institutions and all of its member banks, both small and large, have many borrowing customers which are small business enterprises. To illustrate the small business character of banking, out of a total of approximately 13,700 commercial banks, around 8,900 banks or 65 percent have deposits of less than $5 million, and about 11,000 banks or 80 percent have deposits of less than $10 million. |